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Credit deflation and the reflation cycle to come (part 2)


spunko

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On 07/12/2019 at 09:22, DurhamBorn said:

As you say,money is a tool and should be seen as such,a tool to achieve or enjoy units of time as you see fit.

100%.  My stress is I have not fully deployed my capital/used it as a tool.  Plus I'm further stressing about losing it as I know better how to mitigate the risks.  Trouble is I may have rushed ahead in the other enjoyable areas and not fully completed the supporting financial side first.  To me the clock is ticking and the sooner I complete my deployment and other plans for (semi) retirement the better.  Yes, I am being hard on myself but hopefully I can channel most of that energy into getting things done.  Plus maybe taking a bit of time has not been all bad as things do change. 

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On 07/12/2019 at 16:11, reformed nice guy said:

One of the things that has helped me out immensely, that you have hinted at, is that for the past 18 months or so I have been keeping a detailed note of my spending. This has allowed me to plan more accurately rather than relying on googling "how much is average monthly spend retirement uk 2019"

Top job.  I did the same at the outset of my journey.  It's not just about getting better data but also about immersing yourself in the data so you can understand it, making changes and plans as necessary.  That is, appreciate the data rather than just understand it.  This has to be the place to start and build from.  Furthermore, you get to know your required rate of return so you can then choose a commensurate level of risk for your investments - neither too high nor too low - something these generic "rules of thumb" can never really do that well.    

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22 hours ago, DurhamBorn said:

One thing im going to do more of though is learn extra DIY skills.Im pretty good anyway,but would like to do bigger jobs myself.

Thoroughly recommended.  I was coasting in a career, learning nothing new, and limited in what I could do to remediate due to the demands of work.  So living a bit of a soulless life.  I have learnt so much since changing direction.  Actually quite impressive and something to feel good about.  Real skills and knowledge covering a broad array of topics but all with the self sufficient/reliant theme.  It keeps you physically active and your mind actively learning.  You'll probably do a better job too!  Then people will ask for you to do similar so if you want.......

PS:  Hot tip, get the white van early on!

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7 hours ago, NogintheNog said:

......One of the trusts I have inside my ISA is the Personal Assets Trust (LON: PNL) which is a very defensive fund run by Sebastian Lyon. Interestingly in this interview from 2015 he was asked by Moneyweek how he saw deflation turning to inflation. Have a listen from about 20:35mins....

Thanks for the link.  I often come back to this fund and may bite one day.  Not 100% convinced it's been that an effective hedge but I need to look closer, and see if the world around it has changed to give it its day!

PS:  Just listened.  Can't argue.  And he was saying this in 2015!

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4 hours ago, DurhamBorn said:

We are still in the deflation,the liquidity isnt growing as fast as the debt destruction and im expecting demand drag to pull down lots of areas soon.

I sign up to the demand drag but what kind of things are you thinking of when you say (the current?) "debt destruction"?

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Bobthebuilder
2 hours ago, Harley said:

PS:  Hot tip, get the white van early on!

Hotter tip, if you are in your 20/30s then buy the white van, claim it off tax bill, fit as many boilers as you can.

If you are in your 50s dont bother, repair as many boilers as you can (low cost of materials), dont buy a van, pay as much tax as you can and stick it in a SIPP.

Sell a service not a product.

Sell a service people need, not what people want.

Blah, blah, blah you get my point.

Maybe thats what you said.

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8 hours ago, Bobthebuilder said:

Hotter tip, if you are in your 20/30s then buy the white van, claim it off tax bill, fit as many boilers as you can.

If you are in your 50s dont bother, repair as many boilers as you can (low cost of materials), dont buy a van, pay as much tax as you can and stick it in a SIPP.

Sell a service not a product.

Sell a service people need, not what people want.

Blah, blah, blah you get my point.

Maybe thats what you said.

Just I effed around too long scheduling deliveries or trashing my car.  Plus I would now like to do a van conversion to leisure or mobile tech repair business.  Plus I now identify as a proud real worker of a white van man!

Yep, noticed most of the fitters are young and the older ones can't or don't need to be arsed.  Happy to sell my time as a necessary service with no attempt to employ more to a skim a take.

Busy week ahead!

PS:  Think DB already has a van but may not be up to taking a few sheets of plasterboard, if he must!

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14 hours ago, Democorruptcy said:

Is it really that mad... ? 

The FTSE top figure has gone nowhere for decades, while governbankment policy has pushed house prices up and increased the pension age. If they leveraged up on property, might their money have done better than in pensions?

If people are high earners with a decent employer contribution then pensions make sense. Otherwise is it worth locking money up for god's know how long, in a vehicle whose annual increment could be below the inflation rate, instead of putting it in self managed and easier accessible ISA?

I FIRE'd due to going heavy on my pension between 30 and 50.

You need to ignore the top figure as most gains are made from the reinvested dividends which don't figure in that. And I'd recommend investing beyond just the UK FTSE.

Of course the other benefit is the tax relief going in which means that you can sustain a minimum 20% drop in FTSE (based on a single investment) without going below the net invested.  And if you are really fortunate to earn more than the 40% tax band then dump most in your pension to avoid paying it.

You're not mad if you don't do it, but there's more to it than meets the eye.

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Democorruptcy
56 minutes ago, CVG said:

I FIRE'd due to going heavy on my pension between 30 and 50.

You need to ignore the top figure as most gains are made from the reinvested dividends which don't figure in that. And I'd recommend investing beyond just the UK FTSE.

Of course the other benefit is the tax relief going in which means that you can sustain a minimum 20% drop in FTSE (based on a single investment) without going below the net invested.  And if you are really fortunate to earn more than the 40% tax band then dump most in your pension to avoid paying it.

You're not mad if you don't do it, but there's more to it than meets the eye.

I know about re-invested dividends thanks, I was merely suggesting why other people might have turned away from financials to leverage up on housing. Obviously with hindsight you can swerve shares that have faltered, like dividends from "safe" areas such as banking pre-2007 and all the other firms that have gone bust, but it adds to their "nothing is as safe as houses" mindset. 

I also know tax relief on money going in thanks but again there's a lot of whining in the press about the "unfair tax" on pension income. 

The governbankment have made housing more attractive than pensions to a lot of people, so they haven't been mad, they have followed the money. I wasn't suggesting people should avoid pensions and invest in housing but I can see why they might have done it. A lot of people must have made a lot more money from property that what they would have done in a pension. The governbankment have now started pension auto-enrolment to try force more money back into pensions and let people access them earlier to try make them more attractive. Maybe in the future things might change and dinner party conversation might switch how big is my pension pot instead of how much is my house is worth?

 

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14 hours ago, Harley said:
21 hours ago, NogintheNog said:

......One of the trusts I have inside my ISA is the Personal Assets Trust (LON: PNL) which is a very defensive fund run by Sebastian Lyon. Interestingly in this interview from 2015 he was asked by Moneyweek how he saw deflation turning to inflation. Have a listen from about 20:35mins....

Thanks for the link.  I often come back to this fund and may bite one day.  Not 100% convinced it's been that an effective hedge but I need to look closer, and see if the world around it has changed to give it its day!

PS:  Just listened.  Can't argue.  And he was saying this in 2015!

I think in a deflation like most other trusts it's gonna take a hit, but this trust has some serious cash firepower having sold 'over priced' stocks over the last 5 years. In 2009 it dropped less than other trusts and recovered even stronger. The current asset allocation is here;

https://www.patplc.co.uk/portfolio-data/PDF

20% cash & UK T-Bills, 30% US TIPS, 9% Gold Bullion!

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14 hours ago, Harley said:

I get more pleasure from maximising the return on my current cheap car.

Same here Harley. My car failed its mot last week due to cracked windscreen and it can't be repaired due to the crack being too large - so a new windscreen is required - ouch!! If the crack could've been repaired AutoGlass were quoting nearly £200 for the job. Now I know AutoGlass are not the cheapest - but guess what - I found a local company (Smile Windscreens) to provide and fit a new windscreen for £222. Smile only do Kent btw, but i'm sure other operators provide similar service elsewhere in UK.

Anyway thought it interesting as its another example of the biggest NOT being the best. Also my local garage wouldn't recommend anyone local or cheap despite them having done this for me in the past, instead they stuck to pushing for AutoGlass. Their staff have changed over the years but I think its just another indication of how businesses (even my local grease monkeys! - no offence intended!) go for pallid/safe/low risk advice, ahead of genuine customer service.

 

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5 minutes ago, Tdog said:

Most insurance companies insure windscreens these days, dont yours?

About 4 years ago i took my car to Kwikfit for one of their free break tests, was told i needed to spend hundreds on getting the breaks fixed ... took it to a local garage where i was told they were fine.. They ended up fixing them 3 years after Kwikfits scam for about £150.

I'd avoid any multinational garage as i presume they're all up to their necks in debt or im funding a few multi million pound salaries.

Tdog, I should have mentioned I still use TPFT insurance for my car (old car/low mileage these days), my broker says not many of these type of policies around these days and are being phased out and soon everything will be fully-comp. Anyway so no automatic cover for windscreen, but then again have saved over the years, plus (minus?) the excess would have absorbed most of the payout I might have got.

I should have made clear I was talking about my local small garage. I agree with you about KwikFit et al, I instead use an independent outlet tyre-fitter.

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14 hours ago, Harley said:

Top job.  I did the same at the outset of my journey.  It's not just about getting better data but also about immersing yourself in the data so you can understand it, making changes and plans as necessary.  That is, appreciate the data rather than just understand it.  This has to be the place to start and build from.  Furthermore, you get to know your required rate of return so you can then choose a commensurate level of risk for your investments - neither too high nor too low - something these generic "rules of thumb" can never really do that well.    

Harley, notice you now use Gin Lane as your profile pic. - hope your not immersing yourself too literally in that there data you mention!! (...interesting how moralities change over time, were you aware that there is also a 'Beer Street' that sought to depict the opposite moral stance?)

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20 hours ago, DurhamBorn said:

.......... the energy sector needs more work,as does the insurance sector.That wont be bought until well into any big market move though,as some will likely go under.

I'm beginning to think the insurance sector might never be a good place to invest in future because the likely claims may rocket because of all the weather events which seem to be increasing rapidly ie flooding etc.  Do you take this into account when constructing a road map or do you think it won't be a significant factor?

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15 hours ago, Harley said:

Thanks for the link.  I often come back to this fund and may bite one day.  Not 100% convinced it's been that an effective hedge but I need to look closer, and see if the world around it has changed to give it its day!

PS:  Just listened.  Can't argue.  And he was saying this in 2015!

Harley, re safeguarding capital/positioning for next cycle by potentially using the Personal Assets Trust, i've heard similar good things, though tbh don't know too much about it, for the Henderson International Income Trust.

It is a value player, also seeking out semi-conductors and Siemens pharma subsidiaries for example, and is reducing US exposure for EM exposure.

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48 minutes ago, janch said:

That's just a flesh wound, the nearly 95% loss of value since 2012 is ouch.

Directors added value for someone, but it wasn't the shareholders!

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Bricks & Mortar
6 hours ago, Tdog said:

Most insurance companies insure windscreens these days, dont yours?

Beware.  one of my guys cracked a van windscreen.  Apparently, it was covered on insurance, so nothing to worry about.  I'd previously got a price of £200 from an independent - but the insurance insisted on Autoglass if they were paying.  So, £440, of which I had to pay £100 excess, and the VAT of £88. (at least we claim that claim the VAT back).
The stinger was about a year later - when I found it would be an extra £500 to stick a new worker on the policy, because there had been 3 claims in the last 5 years - the windscreen - and someone hit my personal car when it was parked - and the new worker himself had a bump with his personal car - The van insurance was only £280 to start with.

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5 hours ago, janch said:

I'm beginning to think the insurance sector might never be a good place to invest in future because the likely claims may rocket because of all the weather events which seem to be increasing rapidly ie flooding etc.  Do you take this into account when constructing a road map or do you think it won't be a significant factor?

No,its just noise.Insurance companies make more money when those things happen,it reminds people they arent insured.The main affect on free cash flow in insurance is interest rates.They will do well in a rising rate cycle,but will probably be whacked at first,so i wont be buying any until well into any falls.

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21 hours ago, Harley said:

I sign up to the demand drag but what kind of things are you thinking of when you say (the current?) "debt destruction"?

Companies are starting to de-leverage Harley.Thats the strong ones.There is also a growing band of companies going under.

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11 hours ago, Harley said:

Just I effed around too long scheduling deliveries or trashing my car.  Plus I would now like to do a van conversion to leisure or mobile tech repair business.  Plus I now identify as a proud real worker of a white van man!

Yep, noticed most of the fitters are young and the older ones can't or don't need to be arsed.  Happy to sell my time as a necessary service with no attempt to employ more to a skim a take.

Busy week ahead!

PS:  Think DB already has a van but may not be up to taking a few sheets of plasterboard, if he must!

Iv sold the van now,cost me £400 including all repairs and depreciation over 3 years £130 a year :D.My partner got a new estate car (as in 6 years old new) and i gave her a grand for her 07 Peugeot estate so i didnt need the van as well.The estate is great,1.6 diesel.Iv already used it for picking up a £1000 Barker and Stonehouse sideboard to use as a TV stand for £40 O.o.Facebook marketplace is a wonderful thing.Im actually hunting down a big rug now.Iv seen a few £300 ones for £50,but im holding out until i find a £800 one for £70ish.

Iv still got my 14 year old PUG as well.

 

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Bobthebuilder
5 minutes ago, DurhamBorn said:

Iv sold the van now,cost me £400 including all repairs and depreciation over 3 years £130 a year :D.My partner got a new estate car (as in 6 years old new) and i gave her a grand for her 07 Peugeot estate so i didnt need the van as well.The estate is great,1.6 diesel.Iv already used it for picking up a £1000 Barker and Stonehouse sideboard to use as a TV stand for £40 O.o.Facebook marketplace is a wonderful thing.Im actually hunting down a big rug now.Iv seen a few £300 ones for £50,but im holding out until i find a £800 one for £70ish.

Iv still got my 14 year old PUG as well.

 

I live in London and we have the upcoming low emission zone rubbish to deal with in Oct 2021. Almost every tradesman i know is buying small petrol cars / estates as van replacements. To much of a unkown to buy a new van that meets the rules (euro 6 diesel or electric) so much outlay you cant even make enough to claim it back on your tax. They have not really thought it through.

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